Sanlam Multi-Strategy Fund...Sanlam is the largest non-banking financial services group in Africa....

Sanlam Multi-Strategy Fund

October 2019Mike Pinggera

For professional investors only

1. About us

2. Multi-strategy team

3. Fund overview

4. Investment strategies

5. Performance over time

6. Investment process

7. Long-term investment themes

8. Portfolio construction

9. Risk management

10.Market outlook

11.Summary

Agenda

2

Sanlam group

3

Founded in 1918 in South Africa as a traditional insurer. Now a diversified financial services

provider

Over 21,000 staff worldwide

The group’s global asset management business has some

£45.7bn in AUM

Global footprint

across 45 countries

Source: Sanlam as at 31/12/2018.

Listed on Johannesburg Stock Exchange with

$12.4bn market cap

Sanlam is the largest non-banking financial services group in Africa

Sanlam Investments

Source: Sanlam as at 31/07/20194

• Founded in 2006 by four founding partners, three of whom were ex-Schroders fund managers

• Sanlam group acquired a 30% stake in 2009, which has now grown to 97%

• Some £5.7bn in AUM

• Our core principles:

Experience matters

Our fund managers bring decades of experience across all market conditions to bring our high

conviction approach sharply into focus.

Boutique ethos

Our teams are autonomous – there is no central house view. They have the freedom to focus

on distinct investment ideas in their area of expertise.

Client-first thinking

Our fund managers have significant long term equity stakes in their respective businesses.

We therefore remain fully aligned and responsive to our investors’ evolving needs.

Multi-Strategy team

5

Mike PinggeraHead of Multi-Strategy 30 years experience Mike joined Sanlam in January 2013 to develop a multi-strategy proposition. Previously, he headed up the multi-asset group at Insight Investments. Before this, Mike spent 20 years at Credit Suisse where he held senior positions including Head of Special Mandates and Head of Trusts and Charities in the asset management and private banking divisions. As Head of Multi-Asset Solutions at Credit Suisse, Mike managed a team of 14 with responsibility for £5bn of AUM.

Johan BadenhorstFund Manager 18 years experienceBefore joining Sanlam in November 2012 Johan was at J O Hambro Investment Management for 11 years in various roles including Operations Manager, Performance and Risk Analyst and Project Manager where he was responsible for building the derivative infrastructure, as well as oversight on market risk and global derivative risk monitoring. He holds the IAQ, the CISI diploma in Financial Derivatives and has passed Level I of the CFA Program.

Christopher Greenland, CFAFund Manager 8 years experienceChristopher joined Sanlam in January 2016 from Royal London Asset Management where he was a Junior Fund Manager in the UK equities team. He holds a BSc in Mathematics with Music from the University of Southampton, is a CFA charterholder and holds the IMC.

Mike’s 30 years of experience has been dedicated to multi-asset

investing. This includes 12 years of building expertise in sourcing real

asset opportunities

Johan brings dedicated risk management expertise to the multi-

strategy team. Managing risk is a key component of the strategy

Chris specializes in researching and sourcing real asset opportunities

Fund overview

Philosophy Participate when you can and defend when you need to

Style Alternative / Absolute return

Focus Multi-strategy, multi-asset

Exposure Equities, Bonds, Real Assets and other alternatives

Universe Global

Drivers of return Income and capital growth

Short-term target Positive returns

Long-term target CPI +4%

Launch Date 31/01/2013

AUM £281m

Dealing Daily

Currency Classes GBP, USD & EUR

Management fee 0.75%

Structure Irish UCITS V

INDUSTRY RECOGNITION

6 Source: Sanlam as at 30/09/2019. Management fee quoted is the GBP A Class

Key fund statistics

Past performance is not an indicator of future performance

Source: Sanlam, Bloomberg, IA Targeted Absolute Return sector and Trustnet as at 30/09/2019. Correlation to hedge funds data relates to the HFRX Global Hedge Fund GBP Index .7

Number of holdings

Number of short positions

Base Ccy exposure

Traditional vs. alternative

Correlation to MSCI World

Correlation to Gilts

Correlation to hedge funds

98 8 98% 19/81 0.5 -0.1 0.4

Strategy assets

Volatility 260 day

Distribution class income target

Performance YTD

Quartile rank 1 year

Quartile rank 2 years

Quartile rank 3 years

£281m 3.2% 3% p.a. 7.59% 1st 1st 1st

$345m 8.92%5.90% 1 year

6.75%pa2 years

6.94%pa3 years

Investment strategies

The ability to employ a diverse range of strategies helps the fund to unearth attractive opportunities and spread risk

8

Global Equities

Real Assets

Bonds

Strategy: Systematic Rules based exposure to global indices.

Strategy: ThematicReal asset investments in infrastructure, renewable energy and property.

Strategy: LadderShort duration diversified corporate and government bond portfolio.

Asset allocation

Source: Bloomberg. Sanlam as at 30/09/2019. Excludes cash balances. Prorated to 100%.

Diversified across asset classes, strategies, geographies and time horizons

Equity (Momentum), 0.0%

Equity (Synthetic), 13.8%

Hedge, 4.4%

Midcap Alpha, 3.2%

Infrastructure, 7.3%

Renewable Energy, 6.8%

Property, 5.2%

Investment Grade Debt, 24.7%

High Yield, 8.1%

Money Market, 18.9%

Emerging Markets Relative, 0.0%

Commodities, 0.0%

Opportunistic, 4.8%

Yield Enhancement, 1.1%

Other Alternatives, 1.6%

9

Fund evolution

Source: Bloomberg. Sanlam as at 30/09/2019. Excludes cash balances. Prorated to 100%.

The asset allocation evolves and adapts to incorporate new investment opportunities and navigate the challenges of the current environment

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Feb-13 Aug-13 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18 Aug-18 Feb-19 Aug-19

Other Alternatives

Yield Enhancement

Money Market

Opportunistic

Emerging Markets Relative

Midcap Alpha

High Yield

Commodities

Investment Grade Debt

Property

Renewable Energy

Infrastructure

Equity (Synthetic)

Hedge

Equity (Momentum)

10

Performance over time

Source: Sanlam and Bloomberg as at 30/09/2019. Class B GBP is used to illustrate the fund’s longest track record and access requires a separate agreement with Sanlam Investments. Inception date 31/01/2013. Traditional assets are defined as equity index futures, equity index ETFs and government bonds.

The drivers of return have been investments in real assets, synthetic equity options and high yield


11

99

104

109

114

119

124

129

0%

10%

20%

30%

40%

50%

60%

70%

80%

Jan/13 Jul/13 Jan/14 Jul/14 Jan/15 Jul/15 Jan/16 Jul/16 Jan/17 Jul/17 Jan/18 Jul/18 Jan/19 Jul/19

Per

form

ance

Allo

cati

on

Equity

Gov Bonds

Sanlam FOUR Multi Strategy Class B GBP

UK CPI (1m lagged)

Investment process

Investment process

13

Risk Controls

Managing value at risk

• Rules-based stop loss system

• Continuous portfolio monitoring

• Controlling value at risk

Determine split between the different strategies

Allocation to the different components:• Equity beta

• Alpha opportunities

• long term allocation to strategic opportunities such as real assets

AssetAllocation

Analysis

Combining qualitative and quantitative analysis

Equity• Two proprietary quant

models to determine allocation to global equities

Real assets • Fundamental research

on Real Asset funds

Fixed income • Macro environment

determines fixed income allocation

• Equity momentum signals across key large markets

• Long term investment themes

• Reviewing growth, inflation, credit growth, exchange rate moves, monetary and fiscal policy changes and/or risk sentiment

Growth or stability

• Do we want to

position the

portfolio for

growth?

• Do we want to

position the

portfolio for

stability?

Drivers of Return

Portfolio strategies

Macro and top down indicators

Investment horizons

Infrastructure

Renewable energy

Housing

Long-term: inflation

Medium-term: liquidity

Equity SAA

Relative pairs (Alpha)

Benchmark

government bonds

Short duration corporate bonds

Equity TAA

Option overlays

Short-term: volatility

A diversified portfolio which focuses on the short, medium and long-term challenges. Positioned to participate when possible and defend when necessary

14

Long-term investment themes

15

Our real assets investments are centred around our long-term theme of pillars of a functioning economy. The focus is on investments that are key for a successful economy

and beneficiaries of demographic changes

Schools Roads Water Housing Healthcare Transport Renewableenergy

Real assets

Real assets

Source: Sanlam

A detailed analysis of all investment opportunities is conducted internally by the Multi-Strategy team

16

Real assets

Real Assets - Physical diversification

The portfolio holds 33 positions that own 62 different asset types in 57 different countries

17 Source: Sanlam as at 31/08/2019.

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

1Q

15

2Q

15

3Q

15

4Q

15

1Q

16

2Q

16

3Q

16

4Q

16

1Q

17

2Q

17

3Q

17

4Q

17

1Q

18

2Q

18

3Q

18

4Q

18

1Q

19

2Q

19

3Q

19

Infrastructure Property Renewables UK 10Y yld US Treasury


Valuations

With long-term contractual income streams underlying real assets, “spot” valuations are a function of discount rates.

Sector Discount Rates versus bonds

Key metrics


Evolution and performance


30/09/2019 Since Inception SI Annualised Annualised Volatility Risk Adjusted Max Drawdown

Real Asset Carve Out Actual Weight 122.5% 12.9% 6.2% 2.1 -4.6%

The Sanlam Multi-Strategy Fund’s allocation to real assets has evolved and adapted over time to incorporate new investment opportunities.

20

The carve out data shown is based on actual investments held within the Sanlam Multi-Strategy Fund and is shown for illustrative and discussion purposes only. It does not represent the performance of any specific Sanlam managed account or product and do not reflect the fees and expenses associated with managing a portfolio. Carve out performance has certain inherent limitations. The results reflect actual investment decisions made within the Multi-Strategy Fund, but do not represent actual trading and greater portfolio diversification that would be expected within a stand alone vehicle. Investing entails risks, including possible loss of principal. Our approach to sector exposure evolved over time and the data covering 01/07/2017 to date represents our current strategy. This, among many other factors, may impact the future performance.

Past performance is not a reliable indicator of current or future results.

Fund overview – Real Assets

Aim To provide inflation plus returns over a full investment cycle (CPI* +4%)

Style Alternative

Focus Real Assets

Exposure Infrastructure, renewable energy, property and other alternatives

Universe Global

Drivers of return Income and capital growth

Fund yield 3.8%

No. of holdings 33

Investment horizon Long-term

Launch Date 21/08/2018

AUM £209m

Dealing Daily

Currency classes GBP & USD

Management Fee 0.75%

Structure Irish UCITS V

Source: Sanlam as at 30/09/2019. *Equally weighted G10 inflation composite. Management fee quoted is the GBP A Class21

Fund performance - USD

Source: Sanlam.

Past performance is not a guide to future performance.

22

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total% Positive

Months

Best

Month

Worst

Month

2018 0.06%* -2.03% 1.12% 2.55% -0.44% 1.67% 2.28% 1.18%* 0.48% -2.38% 1.23% -1.55% 4.10% 67% 2.55% -2.38%

MSCI

World-0.93%* -4.14% -2.18% 1.15% 0.63% -0.05% 3.12% 1.24% 0.56% -7.34% 1.14% -7.60% -14.10% 50% 3.12% -7.6%

2019 5.66% 0.94% 0.42% 2.27% 0.15% 1.68% 1.20% 1.49% 1.48% 16.24% 100% 5.66% 0.15%

MSCI

World7.78% 3.01% 1.31% 3.55% -5.77% 6.59% 0.50% -2.05% 2.13% 17.61% 78% 7.78% -5.77%

80

85

90

95

100

105

110

115

120

125

01/1

8

02/1

8

03/1

8

04/1

8

05/1

8

06/1

8

07/1

8

08/1

8

09/1

8

10/1

8

11/1

8

12/1

8

01/1

9

02/1

9

03/1

9

04/1

9

05/1

9

06/1

9

07/1

9

08/1

9

09/1

9

Segregated Mandate MSCI World Fund

*Segregated mandate performance was seed client portfolio between 25/1/2018 - 21/8/2018. Segregated performance figures are in USD and gross of all fees, taxes and transaction costs so client returns

will be lower than the returns shown in this document. Fund performance is based on the USD Class SI net of all fees. Calculations have used monthly underlying MSCI Index closing prices. ** Performance combines portfolio simulation with actual strategy returns.

Fixed income allocation


0%

10%

20%

30%

40%

50%

60%

AAA AA A BBB BB B NR

• Striking a balance: Our bond holdings have staggered maturities so that a portion of the overall fixed income portfolio matures on a regular basis

• Mature and reinvest: Bonds that mature are reinvested into other bonds at the steepest part of the yield curve where yields are highest relative toduration

• Risk and return: The aim is to achieve returns over all interest rate cycles, maintain yield and manage risk

Shorter duration, which means lower sensitivity to interest rates

Majority of portfolio in BBB bonds with yield

We invest across the credit and maturity spectrum through a portfolio of relatively short maturity bonds. YTD bond duration has ranged from and 1.8 to 2.3 years

Fixed income

0%

10%

20%

30%

40%

50%

60%

70%

<1 1 2 3 4 5 6 7 8 9

Equity beta allocation

Source: Sanlam and Bloomberg. For illustration only.24

Our two equity strategies follow a disciplined process designed to reflect our central philosophy of participate when possible and defend when necessary. Our equity exposure has ranged from 3% to 29% over the past 12 months

• Proprietary process: In-house built process that helps to decide when to be in or out of equity markets

• Fluid and responsive: Provides trading inputs to determine equity exposure that reflects current market conditions

• Index futures and options: Used to gain exposure when markets are rising and reduce when markets are falling

• Managing risk: Our rules-based stop loss cuts in to reduce the impact of significantly negative market moves when markets come under pressure

Global Equity (Beta)

Equity alpha allocation

Source: Sanlam and Bloomberg as at 30/09/201925

• Is there a good alpha environment? We believe that in the current environment, alpha is possible for mid-cap stocks

• How we action it? Pairing a long position in mid-caps with a short position in large-caps

• What result we are seeking? Generating alpha. If mid-caps do well against large-caps, the alpha potential is accentuated by the long and short positions

Global Equity (alpha)

30/09/2019Cum. Since

Inception

Ann. Since

Inception Volatility

Risk

Adjusted

Max

Drawdown

Mid Index/SPX Index 92.4% 3.4% 7.3% 0.46 -18.9%

MDAX Index/DAX Index 253.2% 6.6% 13.9% 0.47 -32.6%

TMCXG Index/TUKXG

Index 147.5% 4.7% 10.6% 0.44 -26.9%

Combo Return 173.6% 5.2% 7.4% 0.70 -21.1%

Strategy characteristics

Defensively positioned whilst able to participate in periods of positive trends

26

An underlying yield of 3% p.a. from a diversified portfolio of real assets, corporate and government bonds, plus equity options strategies.

Global Equity

options and synthetic options

Diversified Convertible

• Long life listed real assets• Short duration bonds• Income producing

• Equity market participation through futures and options

• Attractive characteristics of equity-like upside potential and limiting downside risk

Real Assets

& Bonds

Risk management

Risk controls

Multi-layered portfolio risk controls at key stages of the process

Investment selection

Portfolio diversification

Option protection

Stop-loss process

Investment level

Process level

28

Risk management

A three stage position management process ensures that portfolio risk is actively managed.

• Each investment is set a downside tolerance based on volatility.

• No upside caps and downside is measured daily from higher highs.

• The process does not interfere with normal daily fluctuations and is based on discipline with management oversight

• Designed specifically to adhere to the fund’s stated downside objectives.

• This process allows portfolio drawdown to be estimated on a daily basis and manage risk.

The investment has fallen ¾ of the maximum expected loss

LEVEL 3 REMOVEThe investment has fallen to the

maximum expected loss

LEVEL 1 REVIEW The investment has fallen halfway to the maximum expected loss

LEVEL 2 REDUCE

29

Portfolio construction – risk

The portfolio enjoys the diversification benefits of a multi-asset strategy. Risk is assessed on a stressed basis which assumes that all investments fall at the same time.

Source: Bloomberg as at 30/09/2019 based on 90 day volatility.

1.8%

0.6%1.1% 1.1% 1.1%

0.1% 0.1% 0.1% 0.0% 0.2%

2.1%

0.0% 0.0%

8.3%

3.2%

0.0%

-0.1%

-1.6%

-0.5%-1.0%-0.9%-1.0%

-0.1%-0.1%-0.1%

0.0%

-0.2%

-7.5%-7.5%

-10%

-6%

-2%

2%

6%

10%

UK L

ong G

ilt

US L

ong B

ond

Inves

tmen

t G

rade

Debt

Hig

h Yie

ld

Infr

astr

uct

ure

Renew

able

Energ

y

Prop

erty

100

vs 2

50

MD

AX v

s D

AX

SPX v

s M

id 4

00

EM

Rel

ative

Oth

er

Altern

ativ

es

Synt

hetic

Glo

bal C

ore

Option

Pre

miu

m

Tot

al

Sanl

am

Multi S

trat

egy

Fund

Volatility

Drawdown

30

Historic drawdowns

The Sanlam Multi-Strategy Fund has consistently displayed lower drawdown characteristics than traditional asset classes.

Source: Bloomberg as at 30/09/2019

-20%

-18%

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2013* 2014 2015 2016 2017 2018 2019 YTD Max Drawdown

since inception to

30/09/2019

Comparative Drawdown Analysis 31/01/2013 to 30/09/2019

Sanlam Multi Strategy GBP B Class

FTSE All Share TR

FTSE Actuaries UK Conventional Gilts All Stocks Total Return Index

31

* Part year performance.

Conclusion

Market outlook 2019

Source: Sanlam and Bloomberg

Positioning • We continue to position the portfolio with the profile of a diversified convertible. We favour option based equity exposure (rather than pure directional investments) alongside income producing real assets and short duration bonds.

Global Equities • Uncertainty on the geopolitical front and normalising interest rates are likely to weigh on equity markets that have enjoyed an extended cycle.

• 2019 focal points

• The path of US interest rates is likely to play a key role in the performance of equity markets.

• US trade policies (disputes, negotiations and agreements) offer the prospect of both positive and negative outcomes.

• The Brexit process will continue to impact sterling and the direction of large-cap UK stocks.

Real Assets • Rising (normalising) global interest rates could put some short-term pressure on real assets, but they remain supported by strong long-term fundamentals.

• If inflationary pressures lead the authorities to tightening rather than normalisation long-term income producing assets with inflation linkage will continue to look attractive.

• Infrastructure, renewable energy and selected specialist property held for 10 years will pay-out between 45% - 60% compared with 14%-15% in a 10 year government bond.

Bonds • The removal of stimulus, led by the US, is expected to continue and will set the tone bond markets.

• Divergence across countries, credit spectrum and between emerging and developed markets should be expected. The key question for investors is; “will normalisation eventually become tightening?”

33

Summary

• The current low rate environment is relatively benign for corporations making equities more attractive than bonds, and bonds more attractive than cash.

• Both asset classes remain well supported and significant changes are unlikely (excluding geopolitical risks) until cash rates move meaningfully higher.

• A flexible fund that benefits from diversification across bonds, equities, real assets and other alternative investments.

• The use of long put options (downside insurance) and long call options (upside insurance) addresses potential outliers by positioning the fund for a breakdown or breakout should they occur.

• Diversification and discipline are crucial to participation and protection. A diversified absolute return fund has the flexibility to seek new opportunities from a broad universe but is always prepared for the worst with a disciplined risk process.

34

Appendix

Fund performance - GBP

Source: Sanlam.



Months

Best

Month

Worst

Month

2006 * 1.56% -3.45% 0.19% -0.31% 1.30% 1.77% 1.14% 3.12% 3.28% 8.75% 78% 3.28% -3.45%

2007 -0.23% -0.04% 0.16% 1.96% 3.03% 1.20% 4.32% -0.16% 3.04% 5.04% -1.62% 0.86% 18.80% 67% 5.04% -1.62%

2008 0.25% -0.26% -0.30% 1.65% 0.60% -5.60% -0.32% 2.05% -1.67% -0.20% 0.17% 2.11% -1.75% 50% 2.11% -5.60%

2009 -0.50% -1.76% 1.17% 5.55% 5.63% -0.76% 5.80% 1.95% 3.26% -0.72% 1.97% 2.18% 26.06% 67% 5.63% -1.76%

2010 -2.20% 0.21% 0.61% 1.40% -1.95% 0.60% -0.64% -1.05% 5.33% 1.83% -0.51% 1.93% 5.46% 58% 5.33% -2.20%

2011 0.18% 0.66% -1.07% 1.36% -0.78% -0.80% -0.41% -0.42% 0.76% -0.05% 0.68% -0.04% 0.03% 42% 1.36% -1.07%

2012 0.21% 3.61% -3.42% -0.90% -0.71% -0.02% 0.41% 1.69% 1.54% -0.15% 1.81% 0.79% 4.81% 58% 3.61% -3.42%

2013 3.11%** 0.19% 2.50% 0.61% 1.52% -1.98% 0.80% -1.02% 0.66% 2.30% -0.69% -0.21%4.69%

7.94%**67% 2.50% -1.98%

2014 -1.02% 0.42% -0.62% -0.33% 1.26% 0.20% 1.11% 0.53% -1.65% -0.32% 0.96% -1.70% -1.21% 50% 1.26% -1.70%

2015 0.17% 1.07% 0.00% 1.26% -0.04% -0.96% 0.20% -0.47% -0.57% 1.88% -0.01% -0.38% 2.14% 50% 1.88% -0.96%

2016 -2.49% 0.56% 1.74% 1.14% 0.37% -0.71% 3.37% 1.24% 0.01% -0.64% -0.08% 1.53% 6.10% 67% 3.37% -2.49%

2017 0.56% 1.78% -0.04% 1.15% 1.80% -0.82% 0.79% 0.42% -0.57% 1.31% 0.45% 1.05% 8.13% 75% 1.80% -0.82%

2018 0.24% -1.33% -0.93% 1.98% 0.45% 0.49% 1.29% 0.75% -0.27% -1.70% -0.12% -1.03% -0.24% 50% 1.98% -1.70%

2019 2.29% 0.79% 0.53% 1.96% -1.22% 1.65% 1.12% -0.13% 0.41% 7.59% 78% 2.29% -1.22%

*Performance is based on the underlying simulated portfolio strategy between 31/3/2006 - 31/1/2013. Performance figures are in GBP and gross of all fees, taxes and transaction costs so client returns

will be lower than the returns shown in this document. Calculations have used monthly underlying MSCI and FTSE Index closing prices. Strategy allocations are rebalanced at month end. ** Performance combines portfolio simulation with actual strategy returns.

36

Fund performance - USD

Source: Sanlam.



Months

Best

Month

Worst

Month

2014 -1.04% 0.40% -0.73% -0.35% 1.23% 0.17% 1.07% 0.50% -1.67% -0.36% 0.89% -1.64% -1.59% 50% 1.23% -1.67%

2015 0.10% 1.09% -0.06% 1.28% -0.08% -1.02% 0.18% -0.46% -0.58% 1.86% -0.05% -0.36% 1.88% 42% 1.86% -1.02%

2016 -2.45% 0.57% 1.75% 1.18% 0.37% -0.71% 3.28% 1.27% 1.87% -0.70% 0.90% 0.51% 6.44% 75% 3.28% -2.45%

2017 0.66% 1.80% 0.07% 1.27% 1.87% -0.70% 0.90% 0.51% -0.43% 1.41% 0.52% 1.33% 9.59% 83% 1.87% -0.70%

2018 0.38% -1.25% -0.71% 2.08% 0.54% 0.62% 1.46% 0.87% -0.16% -1.57% -0.01% -0.86% 1.32% 50% 2.08% -1.57%

2019 2.45% 0.95% 0.65% 2.07% -1.04% 1.78% 1.19% 0.01% 0.57% 8.92% 89% 2.45% -1.04%

37

Rolling five year performance

Source: Sanlam and Bloomberg as at 30/09/2019. Class B GBP is used to illustrate the Fund’s longest track record and access requires a separate agreement with Sanlam Investments. Inception date 31/01/2013. Traditional assets are defined as equity index futures, equity index ETFs and government bonds.


38

Distribution class


Since August 2015 regular monthly income payments have been available through the distribution share classes

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

0%

2%

4%

6%

8%

10%

12%

Monthly Distribution Accumulated Distribution Dividend Yield

39

Equity-like returns


0

1

2

3

4

5

6

7

8

9

Ob

se

rva

tio

ns

Return Intervals

Diversified absolute return strategies aim to deliver a smoother path to “equity like” performance

The expected return happened only 11% of the time!

40

Portfolio construction: return

Global Equity: Long-term strategy average returns

Real assets: Current dividend yield plus the lower of 2% or the 10 year breakeven inflation rate

Bonds and MM: Current portfolio YTM

Equity L/S: Long-term strategy average returns

Source: Sanlam as at 30/09/2019. Global equity strategies calculated using data from 31/01/2001. Equity long/short strategy calculated using data from 31/12/1999. Returns are gross of fees in GBP.


41

Ave 12m

Weight

Expected

Return

Expected

Contribution

Global Equity 17.65% 1.27%

Momentum 3.09% 9.42% 0.29%

Synthetic 14.56% 6.75% 0.98%

Real Assets 23.88% 1.65%

Infrastructure 8.53% 6.31% 0.54%

Renewables 8.37% 6.91% 0.58%

Property 6.98% 5.81% 0.41%

Commodities 0.00% 2.00% 0.00%

Other Alternatives 1.95% 6.75% 0.13%

Bonds and Money Market 67.81% 1.03% 0.70%

Equity Long/Short 5.32% 5.22% 0.28%

Cash 6.36% 0.72% 0.05%

Total 121.01% 3.95%

12 month asset allocation range


0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Equity (Momentum)

Hedge

Equity (Synthetic)

Infrastructure

Renewable Energy

Property

Other Alternatives

Investment Grade Debt

Commodities

High Yield

Midcap Alpha

Emerging Markets Relative

Opportunistic

Money Market

Yield Enhancement

Max

Ave

Current

42

Global equity: Binary allocation

Source: Sanlam and Bloomberg as at 30/09/2019.

Consensus trend following strategy (MSCI World example) targeting improved risk adjusted returns through a transparent, repeatable process.

43

Equity beta allocation

Source: Sanlam and Bloomberg . FOR ILLUSTRATION ONLY

Aims to replicate the behaviour of call options without paying an upfront premium.

Rolling tranches reset quarterly.

44

Playbook

MarketEnvironment

Path Equity Strategy

Rising Gradual change Expected to participate as equity allocations are increased by positive trends in equity indices.

Sudden change (positive shock)

Expected lag the initial movement, but participate over the medium-term if positive trends continue.

Front month impact

Upside risk can be reduced via call options.

Falling Gradual change Expected to preserve capital as equity allocations are reduced in favour of cash by negative trends in equity indices.

Sudden change (negative shock)

Embedded protections (hedge investments) are expected to provide an offset and present a window to move to cash.

45

Inflection points

Source: Bloomberg and Sanlam. Monthly price returns between 30/12/1983-30/09/2016

The most effective defence against downside events is preparation. Markets do trend but the first month is important. The use of positive and negative months of the FTSE 100 helps

illustrate this.

0

1000

2000

3000

4000

5000

6000

7000

8000

Dec-83 Dec-88 Dec-93 Dec-98 Dec-03 Dec-08 Dec-13

788.69%

385.43%

-553.79%

-343.26%

-800%

-600%

-400%

-200%

0%

200%

400%

600%

800%

1000%

Sum of positivemonths

Sum of 1stpositive month

Sum of negativemonths

Sum of 1stnegative month

49%

61%

46

Isolated equity alpha

Source: Bloomberg and Sanlam. Monthly price returns between 30/12/1983-31/12/2018

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

IMA UK All Companies 17.00 21.40 12.00 27.00 -2.80 -13.60 -23.00 22.30 12.50 20.70 17.20 1.80 -32.30 30.40 17.30 -7.00 15.10 26.20 0.60 4.90 10.80 14.00 -11.2

FTSE100 Index TR 16.90 28.70 17.50 20.60 -8.20 -14.10 -22.20 17.90 11.30 20.80 14.40 7.40 -28.30 27.30 12.60 -2.18 9.97 18.66 0.74 -1.32 19.07 11.95 -8.7

FTSE250 Index TR 16.20 10.10 4.20 36.40 4.00 -6.70 -25.00 38.90 22.90 30.20 30.20 -2.50 -38.20 50.60 27.40 -10.06 26.11 32.27 3.66 11.17 6.66 17.78 -13.3

Number of funds 98 106 119 127 148 159 171 187 203 211 232 251 268 280 287 268 271 258 257 261 252 248 253

% of Fundsbeating FTSE100 38 6 7 70 79 59 37 78 54 52 73 14 25 59 83 11 79 89 43 84 8 62 23

Average fund vsFTSE100 Index 0.10 -7.30 -5.50 6.40 5.40 0.50 -0.80 4.40 1.20 -0.10 2.80 -5.60 -4.00 3.10 4.70 -4.82 5.13 7.54 -0.14 6.22 -8.27 2.05 -2.5

FTSE250 Index vsFTSE100 Index -0.70 -18.60 -13.30 15.80 12.20 7.40 -2.80 21.00 11.60 9.40 15.80 -9.90 -9.90 23.30 14.80 -7.88 16.14 13.61 2.92 12.49 -12.41 5.83 -4.5

250 Relationship No Yes Yes Yes Yes Yes Yes Yes Yes No Yes Yes Yes Yes Yes Yes Yes Yes No Yes Yes Yes Yes

47

Long-term economic themes

18 YEAR-OLD POPULATION TREND IN UK

18 year Old Population Trends in the UK Permanent Dwellings in the UK

EDUCATION

• Degrees have become a pre-requisite for many jobs

• Despite high tuition fees, applications reached a new record in 2016

• The UK ranks second in attracting international students and isexpected to double by 2025

• Structural undersupply of purpose-built student accommodation(PBSA) in the UK; PBSA providers are helping to meet the demand

HOUSING

• A growing population and slowing construction has caused a significanthousing supply/demand imbalance

• The subsequent rise in renting is a trend which is set to persist:

- “A decade ago 1 in 10 households in England rented. Today 1 in 5 rentprivately.” – Grainger Annual Report 2016

- “It has doubled in size in the last decade and it is predicted to grow by25% by 2020” – Grainger Annual Report 2016

• The private rented sector (PRS) sector is responding with new purpose built rental homes.

Source: ESP Presentation 2017, ONS, Grainger Annual Report 2016.48

Allocation look-through


Case study: Private rental housing

Source: Sanlam and company annual reports Jun 18, Dec 2018.

• Germany’s largest and most diverse real estate business, owning andmanaging residential and commercial units as well as garages and parkingspaces

• A quality business, with defensive characteristics and a dominant marketposition:• High quality portfolio worth some €44bn

• Remarkably low vacancy rates at 2.4%

• Manage over 480,000 units

• Structural market dynamics that remain supportive for growth

• Germany has a structural housing undersupply driven by:• Positive net migration and population growth

• Low construction activity

• Declining social housing stock

• Record low vacancy levels

• A market with a renting bias due to:• High quality rental accommodation

• Muted house price growth historically

• Adverse tax regime for owners e.g. annual land tax and 3.5% propertytransfer tax

Location of Assets

52

Fair Value of Real Estate Portfolio

Case study: Listed private equity

Source: Risoe National Laboratory 1989, Sanlam and company annual reports Dec 2018.

UKW Net Generating Capacity

Wind Atlas

53

• First UK listed renewable energy company

• Launched in 2013 with £260m (at 100p)

• UKW have returned to the market for fresh capital on 10 times since2013

• Current market Cap £2.0bn

• Delivered sustainable, RPI-linked dividends since listing

• Paid 39.98p in dividends since launch

• Since in 2013 launch the total return has been 92.7% vs 44.6% for theFTSE100 Index

• Market share approximately 3%

• The UK possesses a very high wind resource compared with many otherregions. Coupled with a shallow seabed this has helped the UK to becomethe world leader in offshore wind

• First unsubsidised investment was made in October 2018

• Wind energy is a global opportunity


Turbine costs have come down by 32% since 2010

Wind and solar together will generate close to 50% of the world’s electricity supply by 2050.

The first subsidy free farm was acquired in 2018, two years ahead of expectations

The MHI Vestas V164 8.0MW turbine is able to generate enough electricity in one revolution to power a house for 29 hours. 40 of these form part of Walney Extension. At 187m tall, they are 5 metres shy of being twice the height of Big Ben. Two A380s could fit side by side through the diameter.

The UK currently has the largest offshore farm in the world, to be overtaken by a larger farm in the UK in 2020.

New technologies such as ‘whole wind farm optimization’ & ‘digital twins’ are reducing fatigue loads, improving output and extending asset lives.

The maximum manageable blade tip speed for this turbine comes in at 232mph.

The rate of progression in offshore is staggering - in 2014, contracts for offshore wind projects were won at circa £150 per megawatt-hour (MWh). In 2017 the lowest bid price came in at £57.50 per MWh securing a new project coming on stream in 2022

Growth opportunities

Growth opportunities


8 – 15% of electricity generated is lost

through transmission and distribution

There will be 19.8% more 18-year old's in the UK in a decade’s

time - ONS

The number of households renting

has increased by 74% in the last 10 years –

GRI 19 report

The world will have a billion more people in the next 14 years. UN

World population prospects

Renewables now generate a third of UK

electricity

Music streaming is expected to grow by 900% between 2015

and 2030

Water demand is projected to increase

by 55% globally between 2000 and

2050 - OECD

Air traffic growth has increased by 41.4% in

the last 5 years

Case study: Long life assets

Source: IFPI 2017, Sanlam and company annual reports Dec 2017.

Industry Revenue Progression Global Recorded Music Revenue Split 2016

• First UK-listed music royalties fund investing in multiple catalogues of hundreds of songs

• Generates revenues through mechanical, performance and synchronisation royalty streams; all protected by copyright law

• Global recorded music revenues increased for the first time in 2015 since 1999, driven by technological disruption

• Streaming revenue growth has compounded 45% over five years and is expected to increase ten-fold between 2015-2030

• The recent history of fading revenues has resulted in attractively priced copyrights and a higher willingness by writers to sell material

• The cash flow profile is uncorrelated to markets and economic conditions - a unique proposition

56

• Since launch Hipgnosis have purchased over to 6,000 songs

• SONG have returned to the market for fresh capital once since launch

• Titles owned• Umbrella – Rihanna• Single Ladies – Beyoncé• Titanium – Sia• Le Chic – Chic• Smooth – Santana• Me, Myself & I – G-Easy & Bebe Rexha• Despacito – Luis Fonsi & Daddy Yankie• Rappers Delight – The Sugarhill Gang• Otis Redding – Dock of the Bay• Bill Withers – Ain’t No Sunshine & Lovely Day• Ed Sheeran – Castle on the Hill• Camila Cabello - Havana

• Average yield c8% pa

Growth requires fresh capital


4 companies raised £973m 4 companies raised £1,016m

3 companies raised £555m 2 companies raised £221m

INFRASTRUCTURE RENEWABLES

SPECIALIST PROPERTY OTHER ALTERNATIVES

Our current holdings have raised over £2.8bn of fresh capital so far this year.

Contact us

58

Liz AdnittSales Director

T +44(0) 20 3116 4071E [email protected]

Tom WhitfieldSales Executive


Alexandra Dacres-HoggSales Manager


Sanlam InvestmentsMonument Place, 24 Monument Place,London, EC3R 8AJT +44(0) 20 3116 4000W www.sanlaminvestments.co.uk

Platform Availability

59

Platform US Dividend Multi Strategy Real Assets Stable Global Global Value Active UK Global High Q

7IM Platform ✓ ✓ ✓ ✓ ✓ ✓ ✓

AJ Bell (You Invest) ✓ ✓ ✓ ✓ ✓ ✓

Allfunds ✓ ✓ ✓ ✓ ✓ ✓ ✓

Aegon ✓ ✓ ✓

Ascentric ✓ ✓ ✓

Axa Elevate ✓ ✓ ✓ ✓ ✓

Cofunds - Institutional ✓ ✓ ✓ ✓ ✓ ✓

FNZ ✓ ✓ ✓ ✓

Fusion Wealth ✓

Glacier (by Sanlam) ✓ ✓ ✓

Hargreaves Lansdown ✓ ✓ ✓ ✓ ✓

Interactive Investor ✓

James Hay ✓ ✓ ✓ ✓

Novia Financial ✓ ✓ ✓ ✓

Nucleus ✓ ✓ ✓ ✓ ✓ ✓

Pershing ✓ ✓ ✓ ✓ ✓

Pinnacle (Sanlam) ✓ ✓ ✓

Portal ✓

Raymond James ✓ ✓

Standard Life ✓ ✓ ✓

Transact ✓ ✓ ✓ ✓ ✓ ✓

Zurich ✓ ✓ ✓

Important information

60

The Fund has holdings which are denominated in currencies other than sterling and may be affected by movements in exchange rates. Consequently the value of an investmentmay rise or fall in line with the exchange rates. The fund can invest in derivatives. Derivatives are used to protect against fluctuations in currencies, credit risk and interests rates orfor investment purposes. There is a risk that losses could be made on derivative positions or that the counterparties could fail to complete on transactions. The Fund's expenses arecharged to capital. This has the effect of increasing dividends while constraining capital appreciation. Part of the fund is invested in bonds. The government or company issuer of abond might not be able to repay either the interest or the original loan amount and therefore default on the debt. This would affect the credit rating of the bond and, in turn, thevalue of the fund. Investment in bonds and other debt instruments (including related derivatives) is subject to interest rate risk. If long-term interest rates rise, the value of yourshares is likely to fall.

The value of this portfolio is subject to fluctuation and past performance is not necessarily a guide to future performance. The performance is calculated for the portfolio and theactual individual investor performance will differ as a result of initial fees, the actual investment date, the date of reinvestment and dividend withholding tax. All terms excludecosts. Fluctuations or movements in exchange rates may cause the value of underlying investments to go up or down. Do remember that the value of participatory interests or theinvestment and the income generated from them may go down as well as up and is not guaranteed, therefore, you may not get back the amount originally invested andpotentially risk total loss of capital. Therefore, the Manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The Manager has the rightto close any Portfolios to new investors to manage them more efficiently in accordance with their mandates. Collective Investment Schemes are traded at ruling prices and canengage in borrowing and scrip lending. Collective Investment Schemes (CIS) are generally medium to long term investments. A schedule of fees and charges and maximumcommissions is available on request free of charge from the Manager, the Investment Manager or at www.sanlam.ie.

Issued and approved by Sanlam Investments. Sanlam Investments is the trading name for our two Financial Conduct Authority (FCA) regulated entities: Sanlam Investments UKLimited (FRN 459237), having its registered office at 24 Monument Street, London, EC3R 8AJ and Sanlam Private Investments (UK) Ltd (FRN 122588) having its registered office at 16South Park, Sevenoaks, Kent, TN13 1AN.

The Fund is a sub-fund of the Sanlam Universal Funds plc, a company incorporated with limited liability as an open-ended umbrella investment company with variable capital andsegregated liability between sub-funds under the laws of Ireland and authorised by the Central Bank. The Fund is managed by Sanlam Asset Management (Ireland) Limited, BeechHouse, Beech Hill Road, Dublin 4, Ireland, Tel + 353 1 205 3510, Fax + 353 1 205 3521 which is authorised by the Central Bank of Ireland, as a UCITS Management Company andAlternative Investment Fund Manager, and is licensed as a Financial Service Provider in terms of Section 8 of the South African FAIS Act of 2002. Sanlam Asset Management is aregistered business name of Sanlam Asset Management (Ireland) Limited. Sanlam Asset Management (Ireland) has appointed Sanlam Investments UK Ltd or Sanlam PrivateInvestments (UK) Ltd as Investment Manager to this fund.

This document is provided to give an indication of the investment and does not constitute an offer/invitation to sell or buy any securities in any fund managed by us nor asolicitation to purchase securities in any company or investment product. It does not form part of any contract for the sale or purchase of any investment. The informationcontained in this document is for guidance only and does not constitute financial advice.

The fund price is calculated on a net asset value basis, which is the total value of all assets in the portfolio including any income and expense accruals. Trail commission andincentives may be paid and are for the account of the manager. Performance figures quoted are from Sanlam and are shown net of fees. Performance figures for periods longerthan 12 months are annualized. NAV to NAV figures are used. Calculations are based on a lump sum investment.

http://www.sanlam.ie/


61

Please note that all Sanlam Funds carry some degree of risks which may have an adverse effect on the future value of your investment. Any offering is made only pursuant to therelevant offering document, together with the current financial statements of the relevant fund, and the relevant subscription/application forms, all of which must be read in theirentirety together with the Sanlam Universal Funds plc prospectus, the Fund supplement and the KIID. All these documents explain different types of specific risks associated withthe investment portfolio of each of our products and are available free of charge from the Manager or at www.sanlam.ie. No offer to purchase securities will be made or acceptedprior to receipt by the offeree of these documents, and the completion of all appropriate documentation. Use or rely on this information at your own risk. Independentprofessional financial advice should always be sought before making an investment decision as not all investments are suitable for all investors.

This document contains information intended only for the person to whom it is addressed or presented (Investment Professionals, defined as Eligible Counterparties orProfessional Clients), and is intended for evaluation purposes, with no licence to use the content or materials within. It must not be distributed to general public, or relied upon byRetail Investors.

The opinions are those of the author at the time of publication and are subject to change, without notice, at any time due to changes in market or economic conditions. Whilst carehas been taken in compiling the content of this document, neither Sanlam nor any other person makes any guarantee, representation or warranty, express or implied as toits accuracy, completeness or fairness of the information and opinions contained in this document, which has been prepared in good faith, and to the fullest extent permissibleunder UK law. Some parts/sections of this document may been compiled from external sources. Whilst these sources are believed to be reliable, the information has notbeen independently verified and is subject to material amendment, revision and updating, therefore no representation is made as to its accuracy or completeness. No reliancemay be placed for any purpose whatsoever on the information, representations or opinions contained in this document nor shall it or any part of it form the basis of or act as aninducement to enter into any contract for any securities, and to the fullest extent permissible under UK law no liability is accepted or any such information, representations oropinions. The comments should not be construed as a recommendation of individual holdings or market sectors, but as an illustration of broader themes.

Statements in this document that reflect projections or expectations of future financial or economic performance of a strategy, or of markets in general, and statements of anySanlam strategies’ plans and objectives for future operations are forward-looking statements. Actual results or events may differ materially from those projected, estimated,assumed or anticipated in any such forward-looking statement. Important factors that could result in such differences, in addition to the other factors noted with forward-lookingstatements, include general economic conditions such as inflation, recession and interest rates, political or business conditions or in the tax or regulatory framework in the UK orother relevant jurisdictions, any of which could cause actual results to vary materially from the future results implied in such forward-looking statements. No assurance can begiven as to the future results that will be achieved.Sanlam makes no representation as to whether any illustration/example mentioned in this document is now or was ever held in any Sanlam Fund or Model Portfolio. Examples /Illustrations shown are only for the limited purpose of analysing general market, economic conditions or highlighting specific elements of the research process.

All of the information herein should be treated as confidential material with no less care than that afforded to the addressee's own confidential material of the mostsensitive nature


62

Neither Sanlam nor any other person accepts responsibility or liability whatsoever for any loss howsoever arising, either directly or indirectly from any use of this presentation or itscontents or otherwise arising in connection therewith. It should not be copied, faxed, reproduced, divulged or redistributed or passed on, directly or indirectly, to any other personor published in whole or in part, for any purpose, without the express written consent of Sanlam.

This document may constitute material non-public information, the disclosure of which may be prohibited by law, and the legal responsibility for its use is borne solely by therecipient.

There is no certainty the investment objectives of the portfolios or strategies mentioned in this document will actually be achieved and no warranty or representation is given tothis effect.

Sanlam funds mentioned in this document are only available for sale in certain jurisdictions. For the avoidance of doubt, this document is not intended to promote theseFunds to any person in any jurisdiction where such promotion is not permitted under applicable laws and regulations. Potential investors in these Funds should informthemselves of the applicable laws and regulations of the countries of their citizenship, residence or domicile and which might be relevant to any type of transaction in shares/unitsof our Funds. By accepting the terms of this disclaimer, you expressly acknowledge that you are, as the case may be, an investor who is legally or otherwise duly authorised to seekinformation about our Funds. SAH0719(78)1019UKInst

Sanlam Multi-Strategy Fund...Sanlam is the largest non-banking financial services group in Africa....

Documents

Transcript of Sanlam Multi-Strategy Fund...Sanlam is the largest non-banking financial services group in Africa....